Why do we think it won't be worse? If you exclude the circular trading of AI companies from metrics, we're already in a pretty big recession, and that will only get worse if the AI companies collapse.
I also think the circular dealing fears in particular are overstated. Debt financing that looks like this is common in semicon, and I doubt there are any serious investors that haven’t already priced it in. If the bust is fatal for AI investment, it’ll just be bankrupt companies owing money to other bankrupt companies.
The longer a bubble grows, though, the worse it gets when it pops. According to Fed stats, we might still be postponing most of the crash that was going to happen in 2008.
If AI turns the world into a dictatorship, what gives anyone the idea they'll just agree to share that dictatorship with their shareholders? They could just ignore company law - they're dictators!